Market Update 9 Nov 2012 – Food is cheap!

For the first time in quite a while, every asset class was lower this week.

The least weak asset was the long term treasury bond fund (TLT) which declined only 0.1%. The US election result, the impending "fiscal cliff", and massive tax hikes coming in only a few weeks, combined to drive the animal spirits into a frenzied flight to safety, with gold just barely edging out T-Bonds as the market's choicest safe haven. From a technical perspective, TLT is worth watching in the near future. This week it broke above its 200 day moving average on massive volume, and has stayed above for several days. If this support level holds, it could signal a return to its previous trading channel, with significant upside potential.

All the currencies were lower, but the EUR was the weakest, down 4.6% to close at 22.8mg. The USD, CAD, and JPY were in the middle of the pack, down about 3% each, while Bitcoin showed relative strength by dropping only 0.5% in value.

While long term treasuries were treading water, the short term instruments represented by SHY fell 3%, in line with the USD.

Equities were all down for the week, with Japan's Nikkei Index falling the furthest, taking a 6% loss. The S&P 500 fell 5.4%, while the Gold Bugs Index (HUI) fell "only" 1.7%, a strong showing in this weak crowd.

Commodities were also lower across the board, led by coffee, which dropped 6.1% as it made a series of new all-time lows. Coffee isn't the only foodstuff making new lows, however. The UN Food and Agriculture Organization's Food Price Index (chart below) also made a new low, with every category (cereals, meats, oils, dairy and sugar) also making record lows. Overall, food prices are about half what they were 5 years ago, and about a third of what they were ten years ago. Good news for gold-based shoppers!